Self-cert deals pushed through B2L loophole
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Rogue brokers have found a way to push through self-cert deals even though there are no longer any such products on the market.
The regulator’s plan to scrap self-cert, as published in last month’s Mortgage Market Review, has led to lenders such as The Mortgage Works and Beacon Homeloans suspending self-cert lending and Platform pulling out of the sector.
But with no self-cert offering left in the market some brokers have found a loophole to get deals through.
Mortgage Strategy has learnt that some brokers are attempting to disguise what would have been self-cert mortgages as buy-to-let deals.
Although the FSA plans to extend its remit to buy-to-let, at the moment the sector remains unregulated.
And as some buy-to-let mortgages are based on rental calculations rather than income brokers are still able to apply for mortgages on a non-income-veri- fied basis.
One source tells Mortgage Strategy: “Brokers are already finding a way to get the deals through and the MMR has not even been implemented yet. If the regulator kills off self-cert this activity will go through the roof.”
Another source says: “This is not a loophole - it is fraud, pure and simple. Lenders will change their criteria and processes to clamp down on the practice, which could cause big problems in the buy-to-let sector. The brokers doing this should wake up and wise up.”
A spokesman for the National Landlords Association says: “This issue could put the ball back in the regulator’s court and make it reconsider a self-cert ban. And if it emerges as a big loophole lenders will look to close it quickly.”
Rob Jupp, director of Savills Lending Solutions, says the issue of self-cert loans dressed up as buy-to-let is not something he has come across.
He adds: “All the lenders on our panel require income verification anyway because we need to be satisfied that clients can service their loans.”
Matthew Wyles, chairman of the Council of Mortgage Lenders, told delegates at the trade body’s conference in London last week: “Self-cert may have had its day if the FSA gets its way but some consumers will be worse off as a result. A less blunt approach than an outright ban could still be adopted.”
Readers' comments (5)
Anonymous | 16 Nov 2009 5:44 pm
With Buy to Let rates as high as they are, huge fees and criteria for rental income so difficult, how on earth are these brokers getting cases through?
Beats me - unless they have access to rates other's don't.
Any lender now, that comes in offering an 85% BTL deal with 100% rental coverage will get to no.1 spot for BTL mortgages - and they haven't becuase lenders saying house prices are rising are trying to kid us all.
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Anonymous | 16 Nov 2009 6:13 pm
There is no "loophole" here, submitting a residential mortgage application as a Buy To Let is outright fraud on the part of both broker and consumer and that is exactly why the FSA are considering the introduction of the ban.
For too long these so-called professionals have been manipulating data (income included) to secure the deal and profit from the fees with scant regard for the consequences.
Consumers too are equally guilty of deliberately providing falsified information for their own personal gain and then have the audacity to call "foul" and this new "scam" is clear evidence that the minority will continue to defraud and care less for the impact it has the honest majority.
Saving grace? they will probably be limited to 70% LTV with heavier restrictions on new build properties/flats etc - but no doubt these same "professional" brokers will find a way of falsely inflating the house price to suggest a high deposit has been made - no wait, they already do that too!
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Anonymous | 16 Nov 2009 6:38 pm
This is nothing less than mortgage fraud.There is a question on the application which asks if this property is for your own occupation, to say anything different is making the declaration fraudulent and clearly shows a lack of integrity by some brokers in trying to circumvent lenders criteria much like those brokers did with Mortgage Express by using the Buy to Let criteria when in fact it was for the applicants own occupation.Look what happened to that lender and the serious debt problems which resulted.
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P Moritz | 14 Mar 2010 3:23 pm
I have used self-cert loans to build a £6m portfolio since 1997. As a responsible borrower, I am disgusted that the FSA have just issued a blanket ban on all self certs regardless of who wishes to use them. OK, get rid of the irresponsible defaulters, but to punish the innocent, decent, hard working honest borrowers is a disgrace! Without self-certs I'd still be earning a mediocre living as a shopkeeper. Because of self certs I'm the first millionaire in my family. If self-certs are withdrawn, it causes problems for me because I cannot remortgage to raise funds for more purchases, which in turn contributes to the problem. This multiplied by all the responsible self-cert borrowers only exacerbates the housing crisis nationally and has already negatively impacted on employment in all associated sectors of the market. Why doe the FSA not take time to think of the implications before they implement changes that cause such wide-reaching devastation to the market as a whole?
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e lowes | 27 Aug 2010 4:36 pm
surely P moirtiz you are just implying that you over estimate your income because you are not earning enough
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